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5 Reasons Life Insurance Is Integral to Your Retirement Planning

To some, life insurance is simply a safety net to secure your family’s financial future in the years and decades ahead. While this is certainly the flagship benefit of having a policy in your back pocket, it is far from the only reason to start a life insurance plan. Although some policyholders may not take full advantage of it, such coverage can be an invaluable tool when it comes to retirement planning. Life insurance and retirement planning are both key concepts when it comes to the big-picture of your finances, but they don’t have to be mutually exclusive if you know how to intertwine them in strategic ways.

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Here are a few reasons your life insurance policy can help you build toward your retirement.

retirement planning
  1. You can borrow money against your policy: It may not hold true for term life insurance – but, then again, neither does the long-term nature of retirement planning itself – but whole life insurance (as well as other permanent plans) provides policyholders with the ability to borrow money on the cash value of their plan. These funds can be leveraged to gradually build your retirement fund over an extended period of time, inflicting minimal damage on your life insurance coverage. How much you borrow, of course, will be entirely up to your discretion, but it only makes sense to use this inherent benefit of your plan as a building block toward a more stable financial future.
  2. You can protect your retirement fund: Encompassing both your anticipated death benefit as well as any cash value, your life insurance policy can compensate for any lost income, essentially giving you a back-up plan in the event that your retirement funds take a hit. Even if your retirement savings are diminished for any reason, your spouse and dependents will be well-protected if you were to pass away, knowing that they have your life insurance to rely on if tragedy strikes. After all, life has a tendency to throw you a curveball every once in awhile. So having a contingency plan isn’t only the smart thing to do. It’s also the most responsible way to take care of those most important to you. Many families fail to account for their life insurance when calculating their retirement assets. Don’t make that same mistake.
  3. You can receive certain tax advantages: If your life insurance plan does offer a cash value, you’ll be pleased to learn that borrowing from your policy can actually save you a ton in taxes. Whereas outgoing money from most retirement funds is considered taxable income, whatever you take out of your life insurance policy is exempt. Moreover, the reduction in your taxable income could put you into a lower tax bracket altogether, taking a broader approach to reducing your expenses across the board. This is just the beginning of the creative ways in which life insurance can be a money-saving boon for your retirement planning. The options you have available to you do still depend on your specific plan, but be sure to reach out to a qualified professional for help in sussing out the details.
  4. You can preserve your cash value: Depending on your policy, the money you invest in your life insurance plan might be protected from the same kinds of losses that affect other assets, which are more vulnerable to market shift. This means that you can conceivably borrow against your policy as circumstances require without fear that your cash value will diminish over time. Your life insurance coverage can then prove to be one of the safest places to invest toward your future and, yes, effectively plan and save for your retirement years. Even if it may seem antithetical to the entire premise of life insurance, consider it one of the many benefits of investing in your family’s financial security as well as your own retirement.
  5. Your policy is an attractive alternative fund: For all the reasons described above and so much more, life insurance is steadily growing in popularity as a smart alternative way to build your savings, especially if you’ve already significantly built up your other assets. Though it might not serve as the cornerstone of your retirement planning, your life insurance policy could very well play an integral role in building toward that end. Even so, don’t neglect its primary purpose: ensuring that you and your family are protected from whatever the future may bring. Life insurance may offer all kinds of hidden features for those looking to build their savings, but it is best viewed as a supplementary addition to your savings portfolio, albeit an increasingly useful one.

Still unsure about how life insurance can help steer your retirement planning? Let us know your thoughts in the comments section below!

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